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Exam 21: Cost-Volume-Profit Analysis

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Question 81

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The contribution margin ratio is the same as the profit-volume ratio.

A) True
B) False

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Question 82

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Match the following terms (a-e) with their definitions. -The relative distribution of sales among products sold by a company

A) Profit-volume chart
B) Cost-volume-profit chart
C) Sales mix
D) Operating leverage
E) Margin of safety

F) A) and D)
G) A) and C)

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Question 83

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If direct materials cost per unit increases, the break-even point will increase.

Unit variable cost does not change as the number of units of activity changes.

Cost-volume-profit analysis can be presented in both equation form and graphic form.

If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what are the break-even sales (units) if fixed costs are reduced by $30,000?

Louis Company sells a single product at a price of $65 per unit. Variable costs per unit are $45, and total fixed costs are $625,500. Louis is considering the purchase of a new piece of equipment that would increase the fixed costs to $800,000, but decrease the variable costs per unit to $42. Required If Louis Company expects to sell 44,000 units next year, should it purchase this new equipment?

Lee Industry's sales are $525,000, variable costs are 53% of sales, and operating income is $19,000. What is the contribution margin ratio?

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 60%.

Which of the following is not an assumption underlying cost-volume-profit analysis?

Cordell, Inc. has an operating leverage of 3. Sales are expected to increase by 9% next year. What is the expected change in operating income next year?

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs?​Variable Costs Fixed Costs Mixed Costs

Racer Industries has fixed costs of $900,000. Selling price per unit is $250, and variable cost per unit is $130. Required (a) How many units must Racer sell in order to break even? (b) How many units must Racer sell in order to earn a profit of $480,000? (c) A new employee suggests that Racer Industries sponsor a 10K marathon as a form of advertising. The cost tosponsor the event is $7,200. How many more units must be sold to cover this cost?

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is

Payton Industries has fixed costs of $490,000, the unit selling price is $35, and the unit variable costs are $20. What are the break-even sales (units) if fixed costs are reduced by $40,000?

Even if a business sells six products, it is possible to estimate the break-even point.

Which of the following is an example of a cost that varies in total as the number of units produced changes?

Total fixed costs change as the level of activity changes.

Most operating decisions of management focus on a narrow range of activity called the